This article examines the organization of European food industry during a time of significant changes in their operating environment. The creation of common European markets, changes in agricultural policy, changing customer preferences together with technological development have an impact on the organization of the food industry. A significant phenomenon in the development of the structure of the food industry has been vertical integration. Three categories of factors influencing the organizational structure are considered; institutional factors, production costs, and transaction costs. Due to the fact that a major part of the European food processing industry is run by agricultural cooperatives, special emphasis is given to these organizations.